Internet Marketing

I got an email from one of my buddies in the industy asking how to calculate how much they can afford to pay on a CPM for ads outside PPC using the performance data from advertising on PPC content. Here are some fictious numbers he sent over for the example:

PPC Content Stats:
488,000 Impressions
350 Clicks
18 Conversions
$95.00 Ad Cost
5.6% Click Thru Rate

Ad Cost / Impressions = 1.946
1.946 * 1000 = 0.19 CPM

Does this mean we pay roughly $0.19 CPM?

The only missing piece to this equation is the CPA that they are willing to pay for each conversion. Using these numbers they are currently getting a $5.20 CPA on content ads. If they were able to pay $20 CPA then they should effectively be able to buy CPM traffic on a network like AdBrite for around 0.80 - $1.00 depending on the quality of the placement. I would just use this as a gauge and not be afraid to test out networks like DrivePM, MSN DR, Yahoo Class 2 and Advertising.com. Sometimes you’d be surprised running wider reach categories that your ad might perform in areas that you would of never thought of like Maps, Web Mail and IM messenger placements.

If you want to effectively test display banners you should have a budget of about $10k and should A/B test several ad sizes like 728×90 leaderboards, 300×250 square box ads and 160×600 skyscraper units. I have seen different sizes perform better for different types of businesses. You’ll want to get at least 1M impressions on each banner to get good enough conversion and CTR performance results.

Oh yeah, BTW “eCPM” = effective CPM for you acronym junkies.

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